About four years ago, the Chongqing Grain Group (CGG), one of China's largest state-owned grain corporations, made a major announcement: the company was planning to build an industrial soy processing complex in Brazil's Bahia state worth potentially up to 4 billion reals (an exchange rate of $2 billion at that time) in total investment. The project was one of the most significant ever planned by a Chinese company in Latin America--a major step forward in China's ambitions to expand its agribusiness investments overseas to ensure a secure supply of livestock feed and, in turn, inexpensive meat to its ever-increasing urban population.
Today, however, the project has completely stalled. As soon as the announcement was made, fears of a Chinese land grab in Brazil began spreading in the Brazilian media, prompting a backlash against the deal. As the negotiations were taking place, the government began a reinterpretation of its 1971 land purchase law to tighten restrictions against foreign ownership of land--an act that was perceived to be targeted against China. This regulatory uncertainty, combined with Brazil's notorious bureaucracy, has caused the CGG deal to languish--and served as a deference to future Chinese agribusiness investments in the country.
"Despite many announcements, letters of intent, and memorandums of understanding, very few--if any--Chinese investment projects in Brazilian agribusiness have been fully realized to date," said Dawn Powell, a Fulbright scholar who researched Chinese investments in Brazil. "For the sector at large, a successful (CGG) deal would establish a much-needed track record and pave the way for future investment flows, which is very important in the current scenario of regulatory obscurity."
CGG's stalled deal in Brazil is emblematic of the problems China has faced across Latin America when it comes to agribusiness investments involving land. Deals have been announced with great fanfare over the years only to go nowhere or spend years awaiting the proper government approvals. In 2011, for instance, Heilongjiang Beidahuang Nongken Group, China's largest farming company, announced plans to invest $1.5 billion to develop 300,000 hectares of land in Argentina to grow wheat, corn, soybeans, fruit and vegetables. After protests from academics, local communities and environmentalists, the deal was suspended by a court order and a law was passed limiting foreign ownership of Argentine land.